Zomato Considers $1 Billion Fundraising and 49% FII Cap Adjustment: Brokerages Bullish on Stock

Zomato, the well-known food aggregator and quick-commerce player, has captured investor attention once again. The company recently announced plans to explore fundraising through a qualified institutional placement (QIP) to raise approximately ₹8,500 crore ($1 billion). While Zomato has $1.2 billion in its reserves, the proposed capital raise is seen as a move to strengthen its financial position for future growth.

On October 22, Zomato's board will review the proposed QIP, which marks its first major fundraising effort since its initial public offering (IPO) in 2021. Despite no official figure being disclosed, industry reports hint that Zomato may aim for the significant ₹8,500 crore mark.

The potential capital injection is not the only major development. Zomato is also expected to seek permission from the Reserve Bank of India (RBI) to limit its foreign institutional investor (FII) shareholding to 49%. As of September, foreign investors hold around 52.5% of the company's shares. This adjustment could transform Zomato into a more "domestic" entity, which might result in its exclusion from the MSCI indices.

Brokerages, however, remain optimistic about Zomato's future. Jefferies has reaffirmed its "buy" rating with a target price of ₹335, citing the company's robust quick-commerce model and its potential to transition into a more profitable 1P (first-party) inventory-led structure. Presently, Blinkit, Zomato’s quick-commerce arm, operates under a third-party inventory system. A switch to the 1P model, made possible by a reduction in FII holdings, could offer Zomato greater control over inventory, allowing the company to make strategic moves in expanding its product categories beyond groceries.

The take-rate for vendors under the current system is roughly 2% of the gross order value. By adopting a 1P model, Zomato could increase profitability and exercise more control over pricing and operations, mitigating risks while scaling up new categories.

Analysts at Bank of America share a similar sentiment, maintaining a target price of ₹325 for Zomato stock. They expect heightened competition within the quick-commerce sector over the next 6-12 months but believe Zomato's strategic decisions could place the company in a strong position to withstand these pressures.

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If Zomato proceeds with the proposed FII cap, the regulatory process will take time, but it is a key step toward transitioning the company’s operations model and improving profitability.

[Disclaimer: This article is based on available data and market speculation. The content provided should not be construed as financial advice. Investors are advised to conduct their own research before making investment decisions.]